Monday, May 27, 2024

Louisiana Legislature special session on insurance may take place in February

by BIZ Magazine

By Julie O’Donoghue, Louisiana Illuminator

Gov. John Bel Edwards’ administration and legislative leadership said it’s now likely that a special session of the Louisiana Legislature dedicated to the state’s homeowners insurance crisis will be scheduled for February.

Senate President Page Cortez, R-Lafayette, said he and the governor are expected to meet next week to finalize whether a special session is necessary and determine the dates for it. Lawmakers would likely have to meet before Mardi Gras on Feb. 21, Cortez said. 

Edwards’ budget chief, Commissioner of Administration Jay Dardenne, also said Friday a February special session on the homeowners’ insurance crisis was likely.  

Insurance Commissioner Jim Donelon, R-Metairie, is asking Edwards and lawmakers to put at least $45 million in a special fund to attract property insurance providers to Louisiana. Legislators must be in session to vote on a diversion of money that large in the state budget. 

Whether any other issues – related to insurance or not – would be addressed during the special session is not clear. Dardenne said he expected it to be “narrowly drawn,” meaning very few other issues could be debated. 

The state has seen several insurance companies go under or pull out of Louisiana after being walloped by major hurricane seasons in 2020 and 2021. The collapse of the market is dumping more homeowners’ policies into the state’s insurer of last resort, Louisiana Citizens Property Insurance Corp., and driving up housing costs. 

To address the crisis, Donelon has proposed resurrecting an insurance incentive program originally put in place after hurricanes Katrina and Rita in 2005. Companies willing to write policies for higher-risk properties would receive public grants to help cover their costs. The goal is to divert policies from Louisiana Citizens, which offers more expensive plans than the private insurance market. 

The Legislature will convene for its annual regular session in April, but Donelon has argued he can’t wait that long to set up the insurance incentive fund. Companies he is trying to lure to the state are looking to purchase reinsurance, which protects them from failing, in the spring. For his program to be most effective, Donelon needs to be able to point to financial incentives before those reinsurance purchases take place, he said last month.

The Edwards administration and legislative leaders were initially skeptical that a special session was necessary. Last month, Dardenne and Cortez had both said they thought the $45 million transfer could wait until April, when lawmakers got their regular session underway. But after further talks with Donelon, they’ve become convinced that the money may need to be moved earlier than they thought.

“The timeframe of the regular session would be too late,” Cortez said. 

Other legislators also may want to tweak Donelon’s proposal. State Rep. Jerome Zeringue, R-Houma, said earlier this week he wasn’t convinced the state should use the same approach as it did after Katrina and Rita.

Zeringue, who oversees the state budget as House Appropriations Committee chairman, said he thought some financial incentives should not be limited to new insurance companies willing to enter Louisiana’s market, but also offered to existing companies who have “stuck around” and continued to write homeowners policies despite massive storms.

North Louisiana legislators have also expressed concern that this type of state program will mostly benefit homeowners in hurricane-prone parishes in the southern part of the state. House Conservative Caucus Chairman Jack McFarland, R-Jonesboro, said he wants assurances that north Louisiana homeowners might also see some relief if the state dumps tens of millions of public dollars into this fund.

McFarland also said he is a little frustrated that the state is considering such a program for the homeowners’ insurance market but not other industries that face extremely high insurance rates. He said he wants to explore setting up a similar fund for the trucking industry, which has complained of exorbitant insurance costs as well. 

Legislators may also have questions about what guardrails will be in place to make sure companies receiving state support remain financially solvent. Many of the smaller firms that went belly up recently were given financial incentives after Hurricane Katrina, according to The Times-Picayune.  

Only the governor or the majority of legislators are allowed to convene a special session in Louisiana. Cortez said he expects Edwards would call the insurance session, which means the governor would also get to set its agenda.

While financing a $45 million insurance fund may typically be controversial, legislators and the governor are currently sitting on a bunch of unallocated money. The state is expected to bring in $1.5 billion in unexpected revenue over the next 18 months, which should ease discussions over whether the state can afford Donelon’s incentive program.

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